Tag: justice

HOA homebuyers MUST have a competent lawyer before they buy

 

Not only must prospective buyers of homeowner association controlled homes retain a competent lawyer, if one can be found who will represent the buyer, but must also understand the fact that covenants are being constantly interpreted by the courts.  That means whatever you or your attorney think you’ve agreed to, assuming unlike today the buyer doesn’t even have to see the CC&Rs in order to be bound by them, the court may give any entirely different spin on the meaning of the covenant. 

That’s called making new law.  And that’s on top of existing legal precedent heavily in support of HOA governments, and against the privileges and immunities to which we all are supposed to be entitled.  To a very good extent, buyers of HOA homes are getting “a pig in the poke.”

When further considering the argument, like CAI and HOA promoters like to argue, that buying a home is buying an investment, this HOA investment is a very bad deal for an investor.  Recall that even the common law authority on servitudes (covenants)[i] recommends that in the event of a conflict between servitude law and constitutional law, servitude law should prevail.  There goes any vestige of any rights still retained by a homeowner.

In a recent example of “surprise” by the Wyoming Supreme Court[ii], owners who sued their HOA for imposing unreasonable requirements on modifications to their home, and won on that issue, were still denied their breach of contract claim.  Now follow carefully.  The trial court accepted the claim of unreasonableness and stopped there, not addressing the other claim of breach of contract and payment of attorney fees.  The supreme court took the position,

 While we have often explained that restrictive covenants are contractual in nature . . . that does not necessarily mean that a homeowner is entitled to recover contract damages against a homeowners association. Ms. Dwan has not identified any provision of her CCRs that would allow her to claim damages against the Association. She has not provided any legal authority, from Wyoming or any other jurisdiction, supporting her claim for damages.[iii]

The court distinguished between equitable relief  — this ain’t right — from a contract with its explicit wording and absence of wording, which doesn’t have to be equitable.  The board can act unreasonably, but they are not punished for doing so.  (Contrast this with the right to punish the homeowner with fines, which is granted to the HOA under both the CC&Rs and almost every state HOA statutory Act).  Once again, the developer’s  “take it or leave it” contract does not protect against board actions by providing a penalty as a detriment against any such further actions. Once again, where wrong-doing was found against the HOA, the CC&Rs adhesion contract favors the HOA with its silence on damages in the event the homeowner does win a lawsuit.  

   Notes

[i] Restatement Third, Property: Servitudes, § 3.1, comment h.

[ii] Dwan v. Indian Springs Ranch HOA, No. S-09-0064, (WY June 3, 2010).

[iii] Id.

HOA demographics: Arizona Hispanics

 

Earlier I presented demographics from a 2007 CAI study in HOA satisfaction that alluded to the homeowner association resident population being significantly different from the general  population[i].    From the survey, the demographics showed that HOA residents are non-minority, educated, well off seniors.   Either the CAI – Zogby sample was biased or it was representative of the general HOA population.

Being curious as to whether HOAs admit to a segmentation of the general US population, I conducted a non-scientific, “take a peek” analysis of my own. My methodology selected 25 HOAs at random in Maricopa County, AZ, and to look at the single issue of Hispanics living in HOAs.  Because of the lack of accessible data, I relied on subdivision lot ownership records with Spanish surnames as my criteria for Hispanic ownership.  I obtained data on the 8 city/towns represented by the sample HOAs, as well as state and county data[ii]. 

The table below compares the city/town Hispanic percentages, based on the 2000 Census,  with the results found from the HOA county records.

Town/city Census HOA
         
Chandler   21%   5.4%
Gilbert   12%   3.1%
Phoenix   34%   22.2%
Scottsdale 7%   0.7%
Queen Creek 30%   3.6%
Peoria   15%   10.5%
Surprise   23%   11.6%
Avondale   46%   26.8%
         
  AVG 24%   10%

 

The 2000 Census showed a population of 25% Hispanics in Arizona and the sample shows 24%, with the HOA sample average of only 10%. The 2008 update gave a 31% Hispanic population in Maricopa County.  The deviations from the Census population data indicate that the Hispanic population in HOAs did not conform to the overall county data, and that HOAs have a significantly smaller Hispanic population. 

Now, seeking an explanation for this result, I reasoned that this smaller population figure could be the fact that Hispanics in Arizona own a smaller proportion of the homes than non-Hispanics.  In fact a study by HUD based on 2000 Census data revealed about a 50% reduction in ownership of homes for Hispanics:  24.8% for non-Hispanics vs. 12.4% for Hispanics (see Ownership, appendix table 1A,, n. 2).  Even with this substantial reduction in the number of Hispanic owners expected to be found by this analysis of county ownership records, the sample still reflects a significant difference from the Census data.

This question of HOA demographics needs to be given serious study and appropriate research conducted, since there is the implication that HOAs are a vehicle for class structure within the US.  Local governments increasingly support, and even mandate, an  HOA for all new home construction.  And, additionally, that the HOA form of government repudiates the US Constitution, and denies homeowners the equal protection and due process of law in pursuit of an empty statement of maintaining property values.

Notes

[i] See 2010 US Census ignores HOA demographics.

[ii] Ownership in Maricopa County, http://www.huduser.org/Publications/PDF/hisp_homeown7.pdf; population data from http://quickfacts.census.gov/qfd/states/04/0412000.html.  The data was based on the 2000 US Census and 2008 interim data.

Confederate Texas and HOA governments: de facto, unlawful governments

I have argued that HOAs are a second form of illegitimate and unlawful, de facto local political governments.  Randy Barnett, a constitutional scholar, wrote: “Only if it is legitimate can an existing constitutional system issue commands to the citizenry that bind individuals in conscience.”[i]   The HOA government legitimacy rests on just “laws” respecting the rights and privileges of the people without violating the rights of others; that their member’s acquiescence to obey these unjust laws and covenants cannot be misconstrued and interpreted as having consented in good conscience to have so agreed.                                                                                    

I have also argued that, under “government”, Black’s Law Dictionary offers the simple definition:  “The structure of principles and rules determining how a state or organization is regulated.” And, to clarify by what is meant by a “state”, Black’s speaks in the same terms of the differences in function that distinguishes an association from that of the state, and of the need to determine the “essential and characteristic” activities and purposes of a state. A state, according to Black, is a community of people established for “securing certain objectives  . . .  a system of order to carry out its objectives.” Nothing-new here, but Black’s then goes on to say: “Modern states are territorial; their governments exercise control over persons and things within their frontiers” (emphasis added).  And Black cautions not to confuse the “state” with other communities of people in other forms of organizations designed to accomplish other objectives.

What has come to light since these earlier Commentaries, is the US Supreme Court interpretations of “state” and “government” in a question of the legitimacy of the secessionist State of Texas, in regard to the sale of  bonds by Confederate Texas.)

The Court reasoned (emphasis added),

It [a state] describes sometimes a people or community of individuals united more or less closely in political relations, inhabiting temporarily or permanently the same country; often it denotes only the country or territorial region, inhabited by such a community . . . .

The people, in whatever territory dwelling, either temporarily or permanently, and whether organized under a regular government, or united by looser and less definite relations, constitute the state . . . . A state, in the ordinary sense of the Constitution, is a political community of free citizens, occupying a territory of defined boundaries, and organized under a government sanctioned and limited by a written constitution, and established by the consent of the governed.[ii]

This 142 year-old opinion supports Black’ definition and the essential characteristic that makes an entity a government:  a government is the person or group that controls and regulates the people within a territory.  While the functions and services provided by a government are shared with many other entities, such as businesses per se and nonprofit organizations, this definition “separates the chaff from the wheat.”[iii]  HOAs are the governing body of subdivisions that are subject to covenants;  subdivisions are territories, plain and simple.

The Supreme Court further held, with respect to lawful and legitimate actions by de facto governments, and  Confederate Texas was so considered,

It may be said, perhaps with sufficient accuracy, that acts necessary to peace and good order among citizens . . . which would be valid if emanating from a lawful government, must be regarded in general as valid when proceeding from an actual [de facto], though unlawful government; and that acts . . .  intended to defeat the just rights of citizens, and other acts of like nature, must, in general, be regarded as invalid and void.

 

In other words, the acts and actions by a de facto and unlawful HOA political government have validity to the HOA “citizens,” unless these acts and actions defeat the rights, freedoms, privileges and immunities of the people, the HOA members.  The people are still subject to the Constitution in spite of all those arguments that the Constitution is negated by private contracts.  This view is consistent with Barnett’s arguments for obedience in conscience.

Unfortunately for our “Modern Times,”  there is a great division within this country, not this time between the Blue and the Grey, but between the Blue and the Red — the major political parties.  This great division, this Second Civil War as author Brownstein titles his book[iv],  is a war of ideology and dogma — as in the case with HOA “true believers” —  coming before “for the good of the county” and the people.

Notes

[i] See The legitimacy of HOA boards and state legislatures, George K. Staropoli, citing Randy E. Barnett, Restoring the Lost Constitution: The Presumption of Liberty, Ch. 2 (Princeton University Press, 2004).

[ii] Texas v. White , 74 U.S. 700 (1868).

[iii] Government is defined by a “social contract”; HOAs by the new social contract, the CC&Rs, George K. Staropoli (included as Part III, “American Political Governments”, in The Foundations of HOAs and the New America.

[iv] Ronald Brownstein, The Second Civil War: How Extreme Partisanship Has Paralyzed Washington and Polarized America (Penguin Books 2007).

Arizona Attorney General will not prosecute for HOA justice

In response to a homeowners complaint, the AG’s office, Consumer Protection and Advocacy Section, replied,

Unfortunately, the problem you complained about is not within our jurisdiction.  Our office enforces the Consumer Fraud Act, however, the Act does not allow our office to pursue private disputes. Our office represents the state of Arizona and cannot act as a private attorney for individual citizens.

 

Understand that under the legalities here, the AG’s authority to deal with fraud is limited to “consumer fraud”.  Carefully reading the AG’s authority on its website[i], I found that fraud is defined solely in terms of the “selling or advertising“, which precludes its involvement in many of the HOA offenses and abuse.  Fraud, itself, is basically defined in terms of misrepresentation and false statements.[ii]  Consequently, homeowners must look elsewhere within the Attorney General’s Office for possible assistance. 

The Criminal Division[iii] has authority to  “protect the citizens of Arizona by successfully investigating and aggressively and fairly prosecuting criminal cases within the State of Arizona.”  Its Criminal Prosecutions Section contains the Fraud and Public Corruption unit, which “prosecutes white collar crime and fraud by individuals . . ..”  (Nothing further is mentioned of white-collar crime on the AG’s website). Note the distinction between “white collar crime” and “fraud”.  White-collar crime, as stated by the Gillespie Law firm, is a broad label, 

White-collar crimes typically refer to a type of financial, corporate, or economic crime often committed by employees or professionals using deception, as opposed to violent crimes that involve force. Most people who think of white-collar crime think of stock market and business fraud cases. However, white-collar crime involves a wide variety of criminal offenses.[iv]

 

Gillespie then lists the following as white-collar crimes:

1.      Bribery A.R.S. §§ 13-2601, et. seq. 

2.      Embezzlement, Theft, and Larceny A.R.S. § 13-1802 

3.      Extortion A.R.S. § 13-1804.  “Extortion” is a type of theft involving taking property or services through the use of a threat.  A person commits extortion when they knowingly 1) obtain or try to obtain something by threatening to: Cause damage to property, 2) Expose a secret that will subject anyone to hatred, contempt, or ridicule, or to impair their credit or business, or 3) Cause anyone to part with any property.

4.      Fraud Schemes A.R.S. § 13-2310[v].  A person commits a “fraudulent scheme” if, through the use of a scheme, they knowingly obtain any benefit by using false pretenses, representations, promises, or materials omissions.

In order to get the Attorney General to take your case, you need to file a complaint according to the above, with  evidence that can be taken to court.[vi]  Will he take your case?  In spite of the fact that he’s running for Governor, based on his prior unwillingness to defend homeowners against HOA abuse, and his failure to defend the OAH adjudication of HOA disputes, not very likely.  The AG has the discretion to declare, and will most likely do so, declare your complaint a private matter, a tort — a civil, not criminal wrong.[vii]  And asked if his office is to do justice, unlike the Dept. of Justice, he will probably say, no, it is to defend the state government. 

The AG will once again say  (paraphrasing), “Go ye unto the legislature, the sovereign of the state, and seek redress of your grievances.”   We must reply, “Will you come forward and support our cause against HOA abuse and injustice?”  And we must remind him that, “In every stage of these oppressions we have petitioned for redress in the most humble terms: our repeated petitions have been answered only by repeated injury.” [viii]

 Notes

[i] http://www.azag.gov/consumer

[ii] “A knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his detriment“, Black’s Law Dictionary.

[iii] http://www.azag.gov/criminal

[iv] ARIZONA THEFT / WHITE COLLAR CRIME, The Gillespie Law firm; the law firm is a criminal defense firm  (http://www.craiggillespie.com /theft.html).

[v] “Any person who, pursuant to a scheme or artifice to defraud, knowingly obtains any benefit by means of false or fraudulent pretenses, representations, promises or material omissions is guilty of a class 2 felony.”

[vi] “Fraud must be proved by showing that the defendant’s actions involved five separate elements: (1) a false statement of a material fact,(2) knowledge on the part of the defendant that the statement is untrue, (3) intent on the part of the defendant to deceive the alleged victim, (4) justifiable reliance by the alleged victim on the statement, and (5) injury to the alleged victim as a result.” The Free Legal Dictionary,  (http://legal-dictionary.thefreedictionary.com/fraud). 

[vii] Viewing HOA injustice as a civil matter sets public policy against the homeowner in that the state is not interested in violations of the law with respect to HOAs. In general, a crime is an offense against society, whereas a tort is a civil wrong against a person. See Tort Law for Legal Assistants, Edwards & Edwards, eds. p. 6 (Thomson 2004).

[viii] Declaration of Independence.

How good are the CAI member HOA attorneys?

Ever wonder if the CAI member HOA attorneys are worth their fees? How good are they? What’s their Win – Loss stats? This data is very difficult to come by from the trial courts, and even from the appellate courts where records are kept. Of course, we wouldn’t want to get these stats from CAI unless their source data is provided for independent inspection, which is a problem based on the recent CAI “satisfaction surveys” lacking in such material disclosures.

Fortunately, detailed records are available from the Arizona Office of Administrative Hearings (OAH) where proceedings are recorded and decisions posted on the internet. For the short period of 28 months (from September 2006 to February 2009), this state agency was permitted to adjudicate HOA disputes, and decided 52 out of 66 petitions.  Although this is a limited sampling not related to civil court cases — where the Rules of Civil Procedure come into play against the Pro Per — these OAH hearings present a leveling of the litigation playing field. An analysis of these cases will provide a good clue to the litigation value of an HOA attorney, and to whether or not engaging a CAI member attorney resulted in improved success.

A colleague gathered the data, which showed the following prevailing party percentages:

HOA                    53.8%
Homeowner   40.4%
Split                      5.8%

This is quite surprising given that in almost all the cases the homeowner was a Pro Per and the HOA was represented by an attorney; and given the fact that the state laws are clearly pro-HOA, and the governing documents amount to an adhesion contract in favor of the HOA. What the percentages seem to be saying is that “black letter” provisions of the statutes or governing documents — it’s right there, in black and white — were violated by the HOA. That an unambiguous provision had been violated and yet the HOA and its attorney failed to “own up” and voluntarily correct these obvious violations. That it took a hearing by the victimized homeowner in order to obtain justice.

The question before us to be answered is: did using a CAI member attorney improve the stats? Roughly 38% of the petitions, 20 out of 52, involved one of four CAI member attorney firms, with

CAI prevailed                            55.0%
Homeowner prevailed           45.0%

Intuitively, and supported by statistical analysis, engaging CAI member attorneys had no impact on the outcome of the hearings. We then ask: What role, if any, do these attorneys play in HOA disputes? And the answer, partly addressed in the highlighted sentence in the earlier paragraph, and from the prolific advisories from one CAI member firm, Carpenter Hazlewood, is: to seek and promote loopholes and technicalities in the law and governing documents that would lead to adversarial litigation.